Interest rates in the eurozone are not expected to rise until next year at the earliest, according to the European Central Bank (ECB). Economic growth in the eurozone lost momentum in the fourth quarter of 2018, rising at an annualised rate of 1.1% compared with growth of 1.6% in the third quarter. According to ECB President Mario Draghi, the rate of economic growth in the euro area had demonstrated a “sizeable moderation”.
- Inflation rose to 1.5% YoY
- German business confidence improved
- The OECD downgraded its economic forecasts for the region
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Interest rates in the eurozone are not expected to rise until next year at the earliest, according to the European Central Bank (ECB), which cited evidence of economic slowdown in the region. The ECB cut its predictions for economic growth across the euro area from 1.7% to 1.1% in 2019 and from 1.7% to 1.6% in 2020. The ECB also announced new stimulus measures designed to “preserve favourable bank lending conditions”.
“The ECB cut its predictions for economic growth across the euro area”
According to ECB President Mario Draghi, the rate of economic growth in the euro area had demonstrated a “sizeable moderation”. He warned that, against a backdrop of “continued weakness and pervasive uncertainty”, the outlook for growth in the short term would be weaker than previously expected.
The rate of inflation in the eurozone is predicted to be 1.2% compared with a previous forecast of 1.6%; ECB policymakers have a medium-term inflation target of “below, but close to, 2%”. During February, the eurozone’s annualised rate of inflation rose to 1.5% in February from 1.4% in January.
German business confidence improved in March, according to the Ifo Institute, posting its first rise after six successive months of decline. Although the outlook for manufacturing continued to deteriorate, confidence amongst service providers and exporters showed a noticeable improvement, and the German economy is “showing resilience”. The Dax Index rose by 0.1% in March, while the CAC 40 Index rose by 2.1%.
Economic growth in the eurozone lost momentum in the fourth quarter of 2018, rising at an annualised rate of 1.1% compared with growth of 1.6% in the third quarter. The outlook for the eurozone’s economic expansion has deteriorated, according to the OECD, which cut its economic growth predictions for the euro area from 1.8% to 1% this year, and from 1.6% to 1.2% next year. Germany is forecast to achieve growth of only 0.7% in 2019 and 1.1% in 2020; France’s economy is forecast to grow by 1.3% this year and next year, and Italy’s economy is expected to contract. The positive impact of wage growth and solid household spending is likely to be offset by political uncertainty, softening external demand, and declining confidence. Focusing on the risks posed by Brexit, the OECD warned that a no-deal Brexit was likely to cause a recession in the UK that would, in turn, create a “major adverse shock for Europe”.
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